NEW YORK, March 22 (Xinhua) -- The existing bailout tool box is enough to rescue Cyprus if it can come up with a decent plan acceptable to international lenders, said Willem Buiter, chief economist of Citigroup, at the Council on Foreign Relations on Friday.
Buiter said Cyprus accounts for 2 percent of the GDP of euro area, therefore the risk is manageable.
However, he noted, the only channel of systemic stress for the risk is through contagion and there would be fear of break-up and of other countries leaving the euro area, especially when they are larger countries.
According to Buiter, contagion is reality but the question is how severe and how it could be handled. "Until we have the OMT ( Outright Monetary Transactions), I was very concerned about it, because clearly if market cuts off a nation's banks and sovereign from funding, you can easily get self-fulfilling exit of fear equilibrium outcome," he added.
Despite the risks, the chief economist was "optimistic" that the existing tool kit is enough in terms of the ammunition and the willingness to fire it, although there are still "some question marks".